Weekly Wrap-Up

Last Week In Markets: Jan 28 - Feb 1, 2019

Fisher Investments recaps the biggest market, political and economic news from last week, including US new home sales, eurozone GDP growth and Japanese retail sales.

Global stocks rose amid mixed data releases. US economic data were generally positive in the first full week following the end of the government shutdown. The January Markit manufacturing Purchasing Managers’ Index (PMI) came in at 54.9, in line with expectations (readings over 50 indicate expansion). The unemployment rate increased to 4.0% in January from 3.9% in December. New home sales jumped 16.9% m/m in November, well above expectations for a 2.9% increase. In its January meeting, the Fed left its benchmark interest rate unchanged, as expected.

In the eurozone, December household lending grew 3.3% y/y, narrowly missing estimates. The December unemployment rate held at 7.9%. The January Markit manufacturing PMI fell to 50.5, in line with the consensus forecast and still indicating expansion. The first estimate of Q4 2018 GDP came in at 1.2% y/y, in line with expectations. Italy entered into a technical recession as Q4 2018 GDP contracted 0.2% q/q—the second straight quarterly drop. However, we believe the headwinds causing the contraction—export weakness and borrowing troubles due to higher long-term interest rates—are largely in the rearview mirror. In the UK, the January Markit manufacturing PMI read 52.8, missing expectations. Parliament voted Tuesday on amendments to Prime Minister Theresa May’s Brexit “Plan B.” MPs rejected amendments to delay Brexit and open the door to a second referendum, meaning markets can likely expect the UK to leave the EU on the March 29 deadline, with or without a deal. While uncertainty remains, we believe any resolution allowing markets to move on will be positive for global stocks. For more on Tuesday’s results, please see our 1/29/2019 article, “How Tuesday’s Brexit Vote Solved Everything and Nothing.”

In Asia, data releases were generally positive. Japanese retail sales grew 0.9% m/m and 1.3% y/y in December, more than expected. The unemployment rate fell to 2.4% in December, in line with the consensus forecast. The final January Nikkei manufacturing PMI read 50.3, beating expectations. In China, the January Caixin manufacturing PMI came in at 48.3, missing forecasts, while the official services PMI read 54.7 and beat estimates.

The Week Ahead:

The US announces November trade data and the January Markit services PMI. The eurozone and UK release Markit January services PMIs and the eurozone releases December retail sales. Japan reports the January Nikkei services PMI. China announces the January Caixin services PMI and January money supply.

Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses a Luxembourg tax basis. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.